Bitcoin (BTC) has been making higher lows for the past eight weeks, but during this time, BTC has been unable to flip the $24,000 resistance support on at least three different occasions. This is exactly why the $475 million bitcoin options expire on August 12, which could be a game changer for the bulls.
Given the current regulatory pressures in the game, there appears to be a good enough reason to avoid bullish bets, especially after the US Securities and Exchange Commission filed charges against the former Coinbase manager for illegal securities trading on July 21.
The additional impact from Terra (Luna) – now renamed Terra Classic (LUNC) – the collapse of the ecosystem and subsequent crypto venture capital firm Three Arrows Capital (3AC) filing for bankruptcy continues to weigh on the markets. The latest victim is crypto lending platform Hodlnaut, which suspended user withdrawals on August 8.
For this reason, most traders are holding off their bets above $24,000, but events outside the cryptocurrency market could also have a negative impact on investor expectations. For example, according to regulatory filings released on August 9, Elon Musk sold $6.9 billion worth of Tesla stock.
Moreover, on August 8, Cathy Wood, chief investment officer at Ark Investment, clarified that the 1.41 million Coinbase (COIN) shares sold in July were the result of regulatory uncertainty and its potential impact on the crypto exchange’s business model.
Most bearish bets are below $23,000
Bitcoin’s failure to break below $21,000 on July 27 surprised the bears because only 8% of put (call) options on August 12 were placed above $23,000. Thus, the bitcoin bulls are in a better position when the $475 million weekly options expire.
Bitcoin options collect open interest on August 12th. Source: CoinGlass
A broader view using the 1.23 buy-to-buy ratio shows more bullish bets because the open interest of the call (buy) is $262 million against the put (call) of $212 million. However, with Bitcoin currently standing above $23,000, it is likely that most bearish bets will become worthless.
If the Bitcoin price remains above $23,000 at 8:00 AM UTC on August 12, only $16 million worth of put (sell) options will be available. This difference occurs because there is no use in the right to sell Bitcoin at $23,000 if it is trading above that level at expiration.
Bulls can make $150 million in profit
Here are the four most likely scenarios based on current price action. The number of options contracts available on August 12 for the buy (bull) and put (bear) instruments varies, depending on the expiration price. The imbalance in favor of each side constitutes the theoretical profit:
Between $21,000 and $22,000: 70 calls for 4,200 puts. The net result favors the Bears by $90 million.
Between $22,000 and $24,000: 1,600 calls for 1,460 points. The net result is balanced between bulls and bears.
Between $24,000 and $25,000: 3,700 calls for 120 points. The net result in favor of the bulls is $90 million.
Between $25,000 and $26,000: 5,900 calls for 30 puts. Bulls increase their winnings to $150 million.
This crude estimate takes into account buying options used in bullish bets and selling options exclusively in neutral to bearish trades. However, this oversimplification overlooks more complex investment strategies.
Related: Bitcoin braces for US inflation data as CPI nerves halt Bitcoin price gains
Futures markets show that bulls are less inclined to show strength
Bitcoin bears need to press the price below $24,000 on August 12 to balance the scales and avoid a potential loss of $150 million. However, Bitcoin bulls got $265 million worth of leverage on their long futures trades between August 8-9, so they are less inclined to push the price higher in the short term.
However, the most likely scenario for August 12th is the $22,000-24,000 range, which provides a balanced outcome between the bulls and the bears. Given Bitcoin’s negative 50% performance year-to-date, even a small $90 million win for the bulls could be considered a victory, but that requires BTC to stay above $24,000.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risks. You should do your research when making a decision.